UK food delivery market

Question 1

Describe food delivery market

Answer 1

• contestable market accelerated by lockdown
• dominated by a small number of firms like Just east, uber eat and deliveroo
• smaller firms offering grocery delivery has entered basied in cities where marginal cost of services is lower and potentially more profitable (GETIR)

Question 2

How many people use it?

Answer 2

• 2021 which? survey showed 7/10 people used food delivery apps
• average 30 yr old uk resident spends £8.50 on takeaway
• valued at £11 bn in 2020 forecast to reach £12.6 bn in 2024

Question 3

main competitors by food app downloads for 2021

Answer 3

uber eats: 5964 000
deliveroo: 5096 000
just eat: 4048 000
tesco grocery: 2772 000 (far ahead other supermarket apps)

Question 4

market share in food delivery industry 2021

Answer 4

26% deliveroo
45% just eat
27% uber eats
OLIGOPOLY

Question 5

what does top three firms take away from restuarants

Answer 5

just eat: 295 GBP joining fee, 14% comission fee
uber eats: £350 activation fee, typically 30% comission fee
- deliveroo: 20%-30% comission

Question 6

evidence of oligopoly in food delivery market

Answer 6

interdependence:
price competition: delivery fee per transaction, admin fee, discount codes and special offers
- they all have a similar service charge of 5% indicating price rigidity

non-price comp: ease of using app, delivery time, qual of customer service, rnage of restaurants on app

Question 7

focus on deliveroo

Answer 7

• stock market floatiation raised 1bn gbp
• recorded a loss before tax of £298mn in 2021
• loss was bc tech investment and marketing spend apperz
• pledged to pay 90 000 riders at least minimum wagte after costs but only while delivering an order, under a deal with GMB trade union which recognises them as self employed
• diversified into on demdand delivery from boots and 4600 supermarkets

Question 8

why do food deliverers lose money

Answer 8

• heavy spending on marketing for market share
• pressure to lower delivery fees; apply game theory here
• rising labour costs as they take on more rides
• pressure to raie wages and offer standard employment rights such as sick pay
• enormous fixed costs of building the platfrom infrastructure
• cannto raise a lot of revenue outside of delivery

Question 9

what is getir known for

Answer 9

• 10 min delivery model with delivery fee of £1.99 on orders below £20 (higher in ldn)
• vertically integrated distibution network working with local warehouse operators
• registered living wage employer, workers get sick pay and paid holidays and insurnace
• delivery only using electric bikes

Question 10

how does getir make profit?

Answer 10

• revenue from selling groceries at a marked up price for such quick delivery
• warehouse partners are franchisess so they dont pay rent
• avoid hiring retail assistants
  -limited range of groceries so more purchasing power

Question 11

changing nature of delivery market

Answer 11

• highly contestable bc consumers are price sensitive and barriers to entry are low
• consumers have market power and can request low price and high quality bc switching cost is low (high XED)
• bargaining power of workers is low; monopsony

Question 12

paths to long run profit

Answer 12

• merger/takeover (just eats takeover of grub hub seen as failure)
• more joint ventures
• investment in dark kitches as a source of revnue and lower costs